renters13_075_mac.jpg Ayanna Ivery in her living room of her apartment. Real Estate section cover story. Bay Area rents as well as occupancy rates are starting to climb out of a four-year trough that began with the dot-com bust.
We would like to make an environmental portrait of Ayanna Ivery, a student who, after weeks of careful searching, found her dream apartment. Event in Oakland, Ca on 11/9/05. Michael Macor / San Francisco Chronicle Mandatory Credit for Photographer and San Francisco Chronicle/ - Magazine Out less

renters13_075_mac.jpg Ayanna Ivery in her living room of her apartment. Real Estate section cover story. Bay Area rents as well as occupancy rates are starting to climb out of a four-year trough that began with ... more

Photo: Michael Macor

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renters13_018_mac.jpg Leo inside the penthouse which looks out over Lake Merritt, unit rents for 2,850.00 a month. Real Estate section cover story. Bay Area rents as well as occupancy rates are starting to climb out of a four-year trough that began with the dot-com bust.
We would like to photograph small landlord Leo Sorensen in one of the vacant apartments in his flagship building on Lake Merritt. There are two vacant apartments, the penthouse, which rents for $2,800 and a smaller unit. Leo will be happy to show you both for photo purposes. Event in Oakland, Ca on 11/9/05. Michael Macor / San Francisco Chronicle Mandatory Credit for Photographer and San Francisco Chronicle/ - Magazine Out less

renters13_018_mac.jpg Leo inside the penthouse which looks out over Lake Merritt, unit rents for 2,850.00 a month. Real Estate section cover story. Bay Area rents as well as occupancy rates are starting to ... more

Photo: Michael Macor

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Good place, good price / Bay Area rental market hits a happy medium four years after dot-com boom, bust

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Ayana Ivery liked her studio apartment in the old Victorian in Emeryville. It was clean. The rent was reasonable. It came with free parking, laundry facilities and cable. But when the landlord decided to do some major remodeling and the jackhammers started wailing in the basement, it was time to find some new digs.

Ivery -- a 24-year-old student of fashion design at San Francisco State University who also works 35 hours a week in a restaurant -- checked out about 15 places over the next six weeks.

"Most of them were pretty sketchy," she says. "One was next to a BART station. Another was on the fourth floor of a building that didn't have an elevator." Finally, she found what she was looking for: a place in Oakland that had hardwood floors, plenty of direct light and a bathtub. More importantly, the rent fell within the confines of a working student's budget.

"I think it's actually pretty nice," she says. "I feel like I got a good place for a good price."

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And that, say the experts, is the sign of a healthy, balanced rental market. Ivery didn't, as it seemed many prospective Bay Area renters had to do during the dot-com boom of the '90s, have to lug around suitcases of cash, sign over her firstborn child or engage in a high-stakes bidding war.

Conversely, desperate landlords don't have to behave like barkers in front of a Broadway strip club, luring renters with lavish incentives as they did during the bust that followed the boom.

"It's a matter of balance," says Chris Bates, marketing director of Realfacts, a market research firm in Novato. "At this point, neither side has a huge advantage. Neither has a disadvantage. Renters aren't being gouged, and landlords have some space to increase rents at a reasonable rate as the economy grows."

The latest numbers, says Bates, bear that out. After a three-year period in which occupancy and rental rates remained flat throughout the Bay Area, there has been a slow, gradual increase during the past year.

In San Francisco, occupancy rates went from 92.5 percent in the first quarter of 2004 to 95.5 percent in the third quarter of 2005. In Alameda County, it rose from 93.4 percent to 95.7 percent. In Santa Clara County, the occupancy rate was 95.2 percent.

"A 3 to 5 percent vacancy rate is considered typical," says Joe Preis, president of Metrorent, an online rental service in San Francisco.

While Realfacts' figures are based on the rental and occupancy rates of 215,300 units in apartment buildings of 50 units or more throughout the nine Bay Area counties, Metrorent concerns itself primarily with the smaller units of rental stock usually found in San Francisco. The trend of gradual growth in city and Bay Area environs, says Preis, is the same.

"We noticed that the market started getting tighter in the summer," says Preis. "Prices firmed up. A lot of stuff disappeared. The city has finally pulled in enough people to fill the vacancies."

In the first quarter of 2005, Preis points out, Metrorent had 1,400 listings. At the end of the third quarter, there were 900.

"There's no question that it has become better in the last year, slowly and steadily," says Leo Sorensen, who owns six apartment buildings of 124 units in Oakland. "We've begun to recover what we lost."

Just a few years ago, says Sorensen, the vacancy rate in an upscale building that he owns hovered around 20 percent. Now, all but one of the 18 units is rented. In another building that caters to those with more modest budgets, only two of the 36 units are vacant.

Despite the tighter market, Joseph Justiss, who moved into one of Sorensen's apartments with his partner, Jesus Moreno, at the first of the month, says it wasn't too difficult to find a place. Concentrating their efforts in Piedmont and Lake Merritt, it took them about a month.

"It seems there was enough to choose from," says Justiss. "You can't even go two or three blocks without seeing a For Rent sign in one of the apartment buildings."

While occupancy rates have increased throughout the Bay Area, there has been only a very slightincrease in rents. In the fourth quarter of 2004, the average price of all size units in San Francisco was $1,830, according to Metrorent. It rose to $1,858 at the end of the third quarter of 2005. Throughout the Bay Area, according to Realfacts, the average rent of all size units was $1,339 per month at the end of the third quarter of 2005, up 2.1 percent from previous year.

"I think the landlords are reluctant to increase the rental price because it's still early," says Preis. "But renters are having a harder time finding places."

"There hasn't been much change as far as prices go," says Erica Steverson, advertising manager for Rental Guide, a bi-monthly publication of Bay Area rental listings. "But the apartment owners who were offering incentives a year ago no longer have to. That's pretty much gone."

"The market has stabilized somewhat in the last year," agrees Janan New, director of the San Francisco Apartment Association, a trade organization dedicated to promoting the interests of rental housing providers. "The rents are starting to climb, but it's very slow."

While the Bay Area rental market -- after the roller-coaster ride that took place at the turn of the century -- may finally have stabilized, how long that period of balance remains is anybody's guess.

"There are so many factors that go into creating a stable market," says Realfacts' Bates. "There's the job market, wage growth, the balance of housing stock, interest rates and consumer confidence."

The state Employment Development Department reported that employers added 26,200 jobs in Oakland and San Francisco between August 2004 and August 2005. This, say some analysts, has contributed to the rise in occupancy rates. Because they have the potential to reduce the amount of rental stock, low interest rates and other incentives, such as interest-only loans, may be factors as well.

While incentives and a hot market have the potential to reduce rental stock, that may not always be the case. In some parts of the country, including the Phoenix area, Las Vegas, South Florida and others, the amount of rental stock has ballooned because investor-purchased properties have increased to such a degree that rental rates have fallen dramatically.

"There definitely has been an increase in this kind of purchase here," says Frank Nolan, an agent with Vanguard Properties in San Francisco. "A lot of investors have been cashing in on the interest-only loans. And because it's a hot market, they're trying to take advantage of the interest rates."

Condo conversion and tenancy-in-common purchases in San Francisco are also credited with affecting rental stock. Political forces on both sides of these issues continue to argue the merits of their cases.

"I would argue that there's more rental housing being put on the market than is being taken away," says Brook Turner of Coalition for Better Housing, an advocacy group for property owners. "Many more than the 200 units (condo conversions) that are being built under the terms of the conversion cap."

Matt Franklin, director of the Mayor's Office of Housing in San Francisco, says that that the city has helped finance 1,000 units of affordable housing during the past year.

Despite the complexity of the rental market in the Bay Area and the enormous number of variables that affect it, Bates says the one thing that can be agreed upon is that the current state of equilibrium is a welcome respite.

"I think a stable, growing market is a healthy market for everyone," he says.

Bay Area rental profile
Apartment
rates and occupancy rates in the nine-county Bay Area are beginning to creep
upward after plummeting in the wake of the 2000-2001 dot-com crash and
remaining stagnant since. Here are the results of RealFacts' quarterly surveys
of about 1,200 apartment buildings with 50 units or more.
Apartment rental units by number of bedrooms
Studio 14,367
1 93,079
2 97,662
3 9,838
4 277
.
Average asking rent for all apartment types
Third quarter, 2005: $1,307
(+2% year over year)
.
Average occupancy rate
Third quarter, 2005: 95.1%
(+1.3% year over year)
.
Source: RealFacts
The Chronicle